While most larger companies have almost assuredly already invested the time and resources necessary to the development of a thorough risk management program, it seems that far too many companies have still neglected to do so. What we are left to wonder then is if these companies and their leaders realize just how much danger they are really setting themselves up for by failing to create such a program, particularly when doing so is as simple as following the sixteen easy steps listed below.
- To begin with, company leaders will need to have a proper understanding of what risk management is. Essentially, risk management is a company’s shield against threats, both internal and external, by tracking and monitoring potential risks, and proceeding to assess and mitigate these threats as best as possible. What is more, risk management programs can serve as the cornerstone of a company’s corporate governance practices when used effectively.
- Companies will need to start the planning and development of their risk management programs by identifying what will be required for this program. This is greatly dependent upon the nature of the organization and the industry in which they are involved in order to begin outlining those most common threats inherent there.
- In the process of identifying potential risk factors that may threaten a company, it is important to begin by bringing in as many people as possible to help brainstorm the issues and root out all those threats that may not be as obvious as others, as well as beginning to work on how best to address these problems.
- Once the company has identified as many potential threats as possible, the next logical step is to begin identifying the possible consequences that may be a result of each risk. This will require looking carefully at all the details of the matter and being highly specific in defining what these threats would mean to the company if they ever came about.
- It pays to be careful in the handling of these issues. Sometimes it is necessary to set certain unstoppable threats aside in order to remain focused on those which can actually be dealt with. Given the great volume of threats any one company can expect to face, taking up more time and resources planning against nuclear war might be seen as a bit of a stretch.
- Once a fairly comprehensive set of risk factors has been identified, a thorough list will need to be drawn up. While this may sound superfluous, having such a list will go a long way in simplifying the steps which follow as from this point forward things will become a bitter more difficult.
- At this point, a probability rating will need to be created and assigned to each threat on the list, ranking each risk factor from low to high based on the likelihood of them each actually coming to fruition.
- Similarly to the previous point, an impact rating will also need to be generated for each threat, ranking from low to high, and based on the potential damage that these threats could inflict on the company.
Eight more guidelines can be found in the second half of this article.
Published by Conselium Executive Search, the global leader in compliance search.
